CNA Explains: What Singapore’s national wage guidelines are for

SINGAPORE: Every year, the National Wages Council (NWC) releases salary recommendations for workers in Singapore.

These provide guidance on pay increments, bonuses and one-off payments that affect all employees here, including white-collar professionals. 

But they are not binding on employers – so can they still influence pay and bonuses?

What is the National Wages Council, and what does it do?

NWC was set up in 1972 amid rapid industrialisation and a labour shortage in Singapore.

Facing the risk that rising wage costs could spiral out of control, the government proposed the council as a more stable approach towards wage-setting.

The tripartite body – comprising employers, workers and the government – is now chaired by Mr Peter Seah, a former banker who also chairs DBS Bank and DBS Group Holdings.

Employers are represented by groups like the Singapore National Employers Federation, Singapore Business Federation and business chambers.

Workers are represented by the National Trades Union Congress (NTUC) and associated unions. 

The Ministry of Manpower (MOM) and other government agencies sit on the council.

It typically calls for public feedback before gathering to develop wage guidelines once a year. It may meet more than once during economic crises, like during the COVID-19 pandemic.

NWC’s discussions take into account Singapore’s economic competitiveness, labour market conditions, inflation, productivity growth and the global economic outlook.

Aside from wages, its guidelines also cover other employment-related issues, particularly around skills and training.

What do employers then do with NWC’s recommendations?

The recommendations are not mandatory and it is up to employers how they apply salary benchmarks.

NWC founding chairman Professor Lim Chong Yah has even said that “employers are free to ignore NWC guidelines”. 

But the reality is more complicated.

Let’s look at the civil service, which is Singapore’s largest employer. As expected, it makes reference to the NWC’s guidelines when announcing salary adjustments. For example, when the civil service froze salaries and cut mid-year bonuses during the SARS outbreak in 2003, it cited NWC recommendations.

The government also tends to cite NWC on progressive wages, when it gives lower-wage workers one-time payments on top of their year-end bonuses.

Things are different in the private sector. One human resources practitioner in a firm with more than 800 employees pointed out that companies cannot afford to wait for NWC guidelines, before budgeting for the year ahead.

The HR executive, who asked to be identified only as Ms Lim, told CNA her company still does check its increment and bonus plans against the recommendations to see if it’s in the clear or off the mark.

Let’s say NWC does not call for wage increases for employees who are not lower-wage. Remaining relatively silent on this means such increments are left to market forces, said Ms Lim.

This means if her company plans to give the average worker a “decent” pay raise, then it can be assured it is already doing better than other firms, she added.

One part that stood out to Ms Lim in NWC’s latest guidelines was the call for management to lead by example in wage restraint, in firms that have not done well.

She said this was not articulated by the council in previous rounds of advisories.